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Business insurance overlooked by 'majority of SMEs'

18 August 2009 / by Rachael Stiles

The 'majority' of small and medium sized enterprises (SMEs) in the UK have insufficient business insurance, Simply Business has suggested.

The business insurance provider has revealed that the general consensus among the business community is that most SMEs are overlooking a range of important business insurance policies and putting themselves at risk.

"When starting a business, particularly if you are starting in a new industry or profession, insurance is the one of the easiest things to forget," says Rosie Beasley, spokesperson at Simply Business. "The extra burden of cost an insurance policy puts on a business can be off-putting, and it can seem unnecessary in the early stages."

But insurance is essential to maximise the success of a business, she continued, because without the appropriate protection in place some tradespeople or professionals would be turned down for work, which could be pivotal when a small business is trying to get off the ground.

Self-employed professionals are especially vulnerable to being uninsured, Ms Beasley said, such as those who give advice like consultants and tutors, or who offer a service, like photographers or beauty therapists, and should consider taking out professional indemnity insurance.

This protects professional against situations where they could be accused of negligence, such as providing bad advice or making a serious mistake, which can result in legal claims for large amounts of compensation.

Compensation claims can "seriously cripple or even close down" a small or medium sixed business if professional indemnity insurance is not in place, Ms Beasley warns.

But when it comes to having contact with third parties – such as the general public and customers where there is a chance of an accident which could result in injury – nothing is more important for the majority of small business than public liability insurance, she continues.

For example, Ms Beasley explains, "a plumber who works on his customer’s property for the duration of the job may be liable for any accidents that happen there as a result of his presence. Let’s say our plumber has been installing some piping in a kitchen. A pipe bursts once he has completed the job and the resulting flood ruins the plasterwork, wooden floor and some of the electrical appliances. The plumber would probably be liable for the cost of repairing the damage."

"Public liability insurance is the type of cover that would protect against these sorts of incidents. If you work in a high risk environment or with tools, it is also useful to take out personal accident insurance on top of your business cover."

There is a whole range of other insurance policies that can protect a small business from potential bankruptcy, such as employer's liability insurance (which is a legal requirement), business interruption insurance, and specific insurance for stock or tools.

"This seems like a lot of different insurance policies to undertake and one would assume that the cost for so many would be prohibitive," Ms Beasley said. "Many insurers, however, will include all of them under one policy and by doing so can cut the cost down. This also makes it easier when the time comes to renew."

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